State Administration of Radio, Film and Television, Ministry of Commerce, Ministry of Culture Decree

(No.21)

The “Provisional Foreign Businesses Investing in Cinema Regulations”

were passed at the executive meeting of the State Administration of Radio, Film and Television on September 28, 2003 and agreed to by the Ministry of Commerce and the Ministry of Culture of the People’s Republic of China, are hereby promulgated and take effect on January 1, 2004.

Director of the State Administration of Radio, Film and Television

Xu Guangchun

Minister of Commerce of the People’s Republic of China

Lü Fuyuan

Minister of Culture of the People’s Republic of China

Cun Jiazheng

November 25, 2003

Provisional Foreign Businesses Investing in Cinema Regulations

Article 1: In order to adapt to the needs of reform and opening up, attract foreign capital, introduce advanced technology and equipment, and promote the prosperous development of our country’s film industry, in accordance with the “Law of the People’s Republic of China on Sino-foreign Equity Joint Ventures”, the “Law of the People’s Republic of China on Sino-foreign Contractual Joint Ventures”, the “Film Management Regulations”, and other relevant laws and regulations, these Regulations are formulated.

Article 2: These Regulations apply to foreign companies, enterprises, other economic organizations or individuals (hereinafter referred to as foreign parties) that, according to the principle of equality and mutual benefit and with Chinese government approval, establish Sino-foreign equity or contractual joint ventures, construct or reconstruct cinemas, and engage in film projection business with the companies or enterprises registered within China (hereinafter referred to as the Chinese party).

Article 3: Foreign investors may not establish any exclusively owned cinemas or form any cinema chains.

Article 4: Foreign businesses investing in cinemas shall conform to the following conditions:

(1) deployment and planning conforming to local cultural facilities;

(2) registered capital of no less than 6 million Yuan;

(3) having fixed business (projection) premises;

(4) of Sino-foreign equity joint cinemas, the investment proportion of the Chinese party in the registered capital shall account for no less than 51%; of Sino-foreign equity joint cinemas established in pilot cities Beijing, Shanghai, Guangzhou, Chengdu, Xi’an, Wuhan, and Nanjing, the proportion of the investment of the foreign party in the registered capital may not exceed 75% at most;

(5) a equity or contractual joint venture period not exceeding 30 years;

(6) Conforming to relevant provisions of Chinese laws and regulations.

Article 5: Where the Chinese party participates in investment with state-owned assets (excluding cash), relevant formalities shall be conducted according to relevant provisions on state-owned assets management.

Article 6: Establishment of a foreign-funded cinema shall be reported for examination and approval according to the following procedures:

(1) The Chinese party must file an application with the provincial-level administrative commerce entity of its locality, and submit the following materials:

1. An application form for the foreign-funded cinema establishment project;

2. A legal person status certificate of the Chinese party, relevant materials for the cinema’s land usage right, and bank creditworthiness certification;

3. The foreign party’s qualification certificate, the bank creditworthiness certification, and a financial status certificate issued by an accounting firm;

4. A notice for preliminary ratification of the cinema name issued by the administrative industry and commerce entity;

5. The feasibility study report, contract, and articles of association;

6. Other materials required by laws and regulations and the examination and approval body to be provided.

(2) The provincial-level administrative commerce entity of the applicant’s locality shall, after obtaining agreement from the provincial-level administrative film entity, conduct examination and approval according to relevant State laws and regulations on foreign investment, and report to the Ministry of Commerce, the State Administration of Radio, Film and Television, and the Ministry of Culture for filing. To foreign-funded enterprises approved for establishment, a “Foreign-invested Enterprise Approval Certificate” shall be issued.

3) For a foreign-funded cinema approved for establishment, the applicant shall, within one month from the day of receiving the “Foreign-invested Enterprise Approval Certificate”, conduct registration formalities with the provincial administrative industry and commerce entity with the “Foreign-invested Enterprise Approval Certificate”.

4) After finishing construction or reconstruction of a foreign-funded cinema and after examined as meeting standards by relevant entities, the applicant shall apply for “Film Projection Permit” with the provincial-level administrative film entity with the “Foreign-invested Enterprise Approval Certificate” and the Business License before starting film projection operations.

Article 7: Any modification of the shareholding or investment of an established foreign-funded cinema, shall be handled according to the procedures prescribed in Article 6 of these Regulations.

Article 8 A foreign-funded cinema must observe relevant State laws and regulations, conduct business operations in accordance with the “Film Management Regulations”, and accept supervision and management by the relevant of the Chinese government entities, projected films must hold a “Public Film Projection Permit” issued by the State Administration of Radio, Film and Television, it is not allowed to project any smuggled or pirate films, it is prohibited to engage in commercial video tapes, VCD, or DVD projection.

Article 9: Foreign invested cinema-related subordinates engaging in any other entertainment business must comply with relevant State provisions.

Article 10: Hong Kong Special Administrative Region, Macao Special Administrative Region, and Taiwan area investors establishment of enterprises engaging in film projection on the mainland, will be handled with reference to these Regulations.

Article 11 These Regulations and their appendix shall take effect on 1 January 2004. The “Provisional Foreign Businesses Investing in Cinema Regulations” promulgated by the State Administration of Radio, Film and Television, the Ministry of Foreign Trade and Economic Cooperation and the Ministry of Culture on 25 October 2000, shall be simultaneously abolished.

Appendix:

In order to promote the establishment of closer economic and trade relationship between Hong Kong, Macao and the mainland, encourage Hong Kong and Macao service providers to establish enterprises engaging in film projection on the mainland, and in accordance with the “Mainland and Hong Kong Arrangement on Establishing Closer Trade and Economic Relationships” and the “Mainland and Macao Agreements on Establishing Closer Trade and Economic Relationships”, the following special provisions are hereby made for issues in the in the “Provisional Foreign Businesses Investing in Cinema Regulations” for investment ins cinemas by Hong Kong and Macao service providers:

1. From 1 January 2004, Hong Kong and Macao service providers are allowed to construct, reconstruct and operate cinemas on the mainland through equity or contractual joint ventures. Hong Kong and Macao service providers are allowed to hold majority shares, but not in excess of 75%.

Other provisions on investment in cinemas Hong Kong and Macao service providers on the mainland shall still conform to the “Provisional Foreign Businesses Investing in Cinema Regulations”.